Jobs Rebound, Prosperity Lags

The spring rebound in employment has come to pass — just a little later than projected. The economy added 288,000 jobs in June, and tallies for April and May were revised upward, bringing job creation over the past year to 2.49 million, the highest level in five years. The unemployment rate also fell to 6.1 percent, the lowest level in nearly six years, and, even better, the decline was unambiguously good news. It resulted from people getting hired and not leaving the work force.

Behind the good news, however, there is still enormous slack in the economy. Human capital is being wasted. Economic ground is being lost, often irretrievably. Job growth is still falling short by 6.7 million jobs, including government jobs that were lost and not replaced, plus jobs that were needed to keep up with the population but not created. The jobless rate would be 9.6 percent, if it counted nearly six million people who would be looking for work or working if the economy were stronger.

That means that fiscal and monetary support are still needed, though Congress has long since stopped providing aid and some members of the Federal Reserve appear ready to curtail aid at any sign of growth — no matter how fleeting or inconclusive. The danger is that government policy or, rather, lack of policy, will lock in an economy of diminished opportunity and reduced expectations.

Take, for example, how long-term unemployment and part-time employment can interact to create a permanently lower standard of living. In June, the share of unemployed people out of work for more than six months continued to tick down, while part-time jobs by those who need full-time work increased. It’s not hard to imagine that some of the long-term unemployed are shifting into part-time work, which may be better than prolonged joblessness but is not a path to sufficiency, let alone prosperity. Worse, the spread of part-time work could be bad news for the 9.5 million people who are unemployed and for the millions who enter the work force every year. It allows employers to add hours, not employees, if things improve.

At the same time, hours and wages are not growing for most workers. In addition, average hourly pay, $20.58 in June, has long failed to keep up with growth in productivity. If it had, it would be around $35 an hour. That is not just a raw deal for workers. It is bad for the economy because real wage growth is the basis of economic growth.

We have more jobs and more hiring, but lousy pay. What’s needed is economic growth that is broad, strong and sustained enough to employ sidelined workers, restore opportunity and raise wages. Still unanswered, five years into the recovery, is where that growth will come from.